They Buy Ugly Houses — And Then 'Flip' Them

The roof in the Granby house leaked so badly that there was water damage in the basement. Sliding doors in the living room opened up to a two-story drop where there should have been a deck. And windows were pockmarked by pellets from a BB gun.

Ah, now this is a dream home to Matt Erdmann and Adam Paragone.

They buy ugly houses.

Erdmann and Paragone are co-owners of the first "We Buy Ugly Houses" franchise in Connecticut, which purchases often rundown houses for cash, renovates them in five or six weeks and sells them for a profit.

Ugly is in the eye of the beholder, of course, and for these partners, it isn't all about curb appeal or even the state of repair. The partners think of ugly in the broadest of terms.

Often the properties are ones that banks and other lenders won't take a chance on approving financing for a purchase.

Their latest project — on Salmon Brook Street in Granby — falls into ugly in the former category. It looks to be a split-level contemporary built in the 1960s, likely added onto willy-nilly. Half windows facing the street add an institutional feel. There's no telling why there isn't a deck in the back.

The 1,600-square-foot, four-bedroom, 1.5-bath abode had been a rental for at least several years.

"This is fairly ugly," Paragone said, standing in the basement and pointing to the water damage. "On our scale of one to 10, this is a seven."

It still doesn't beat the foreclosure in West Hartford that had been vacant for a while.

"There were squirrels in the walls," Paragone said.

The partners have a background in real estate, and both still work for the Keller Williams Realty agency. They joined a year ago in We Buy Ugly Houses, a franchise of Texas-based HomeVestors, which has been active elsewhere in the country for a couple of decades.

The business plan is to buy houses cheaply, renovate them with some nice quality finishes and then "flip," or sell, them. The idea certainly isn't new. House flipping has gained widespread attention since the 1990s on television home improvement shows. And who hasn't seen those signs tacked to telephone poles offering to buy houses cheap?

But Erdmann and Paragone can capitalize on the eye-catching "We Buy Ugly Houses."

Their franchise also is backed with support from HomeVesters, which provides software and the business model for identifying potential flippable properties. They can get further assistance in evaluating properties and have access to funds to purchase properties.

In the past year, Erdmann and Paragone have purchased and renovated nine properties and sold six. They hope to double that figure in their second year.

A report this week from RE/MAX of New England suggests that home flipping is on the rise in Connecticut and throughout New England. Investors now believe that as they renovate homes, the market will remain flat or even rise up slightly during the project, the report noted.

"This is a big change from years past," the report said, "when there still was a good chance value would depreciate over a three or six month project."

Paragone said the partners paid $68,000 for the Granby property and will likely invest between $40,000 and $50,000 in the makeover. The work will include installing hardwood floors throughout, nicer cabinetry and fixtures and, yes, a deck. They are targeting an asking price of $200,000.

The house, they say, has plenty of potential. One branch of Salmon Brook backs up to the rear of the property and leads to Manitook Lake. A dock could easily be built off the backyard.

Right now, the partners are targeting properties that would appeal to first-time homebuyers, the segment of the housing market where Erdmann and Paragone see the most sales activity. Their license allows them to operate in Hartford, Tolland, New Haven and Middlesex counties, but they are concentrating on Hartford and Tolland counties right now.

The partners send out direct mail to homeowners in towns and cities where there has been good first-time homebuyer activity.

Sometimes, there can be a bit of blowback from such mailings, like the caller who, Paragone said, took umbrage at what turned up in the mailbox.